2 ms·

Many jurisdictions do not allow this sort of deferals for cheating. Problem is with kickstarter, they should structure this thing as a loan, that gets written

Many jurisdictions do not allow this sort of deferals for cheating. Problem is with kickstarter, they should structure this thing as a loan, that gets written off by delivering or failing.

Cacti 3y ago
you want to make kickstarter an international bank?
- actionfromafar 3y ago
  They sort of are already, no?
jimnotgym 3y ago
On the contrary, most places enforce this kind of 'deferral' (the accruals concept) to stop cheating. Imagine i took all of the cost first and the revenue later. I could offset the loss from this against my other income (which is taxed at source) and get a refund out of the tax authorities! It would be like an interest free loan!
- bruce511 3y ago
  It's also enforced here to keep reports of profits sane. If I report revenue as profit (without adjusting for future expense) then I'm artificially reporting "higher profit than what actually happened." This artificially boosts share prices, and other things, which can have unfortunate effects downstream. Take Worldcom. They defered expenses (by capitalising the phone bill to be depreciated in future years) thus boosting reported profits. With, um, unfortunate results. So yeah, in my jurisdiction its enforced. But I can imagine that in other places its not, or revenue is taxed, or whatever.
  - jimnotgym 3y ago
    Taxing revenue is very useful with multinationals who use cunning tricks to move profits back to their home countries. So yes it remains a valid tax
  - rvba 3y ago
    Tax result <> bookkeeping result <> cash flow In many countries tax office does not care about your bookkeeping result. Tax is calculated using separate rules (and then becomes part of bookkeeping result). Also if we go to philosophical discussions: you can have great bookkeeping result yet no money, or lots of money now, but unprofitable projects (e.g. construction companies).
glennfle 3y ago
It's possible to do this on an accrual basis, but when I have spoken at times to accountants about it, they have discouraged it: the IRS can be dubious, and it makes the most sense to run your business that way if you're entirely organized around it (i.e., you have a profound mismatch in your basic function between income and expense within calendar or fiscal years).

Many jurisdictions do not allow this sort of deferals for cheating. Problem is with kickstarter, they should structure this thing as a loan, that gets written off by delivering or failing.

Cacti 3y ago

you want to make kickstarter an international bank?

actionfromafar 3y ago
They sort of are already, no?

jimnotgym 3y ago

On the contrary, most places enforce this kind of 'deferral' (the accruals concept) to stop cheating. Imagine i took all of the cost first and the revenue later. I could offset the loss from this against my other income (which is taxed at source) and get a refund out of the tax authorities! It would be like an interest free loan!

bruce511 3y ago
It's also enforced here to keep reports of profits sane. If I report revenue as profit (without adjusting for future expense) then I'm artificially reporting "higher profit than what actually happened." This artificially boosts share prices, and other things, which can have unfortunate effects downstream. Take Worldcom. They defered expenses (by capitalising the phone bill to be depreciated in future years) thus boosting reported profits. With, um, unfortunate results. So yeah, in my jurisdiction its enforced. But I can imagine that in other places its not, or revenue is taxed, or whatever.
- jimnotgym 3y ago
  Taxing revenue is very useful with multinationals who use cunning tricks to move profits back to their home countries. So yes it remains a valid tax
- rvba 3y ago
  Tax result <> bookkeeping result <> cash flow In many countries tax office does not care about your bookkeeping result. Tax is calculated using separate rules (and then becomes part of bookkeeping result). Also if we go to philosophical discussions: you can have great bookkeeping result yet no money, or lots of money now, but unprofitable projects (e.g. construction companies).

glennfle 3y ago

It's possible to do this on an accrual basis, but when I have spoken at times to accountants about it, they have discouraged it: the IRS can be dubious, and it makes the most sense to run your business that way if you're entirely organized around it (i.e., you have a profound mismatch in your basic function between income and expense within calendar or fiscal years).